The price of oil has been riding high the last few weeks. And it could go higher:
"Crude oil prices soared to 11-month highs Friday on a new forecast that global oil demand will accelerate next year as supply remains tight."
"'My line right now is that we're headed to triple-digit oil prices within three or four years and the first digit is not going to be a 1,' said Philip Verleger, an economist who heads energy consultancy PK Verleger LLC."
"He cited 'huge' pent-up demand in China and the rest of Asia, lack of growth in production capacity and reduced investment in refineries amid local resistance to new sites, and worries about measures to fight global warming."
Since my recommendation one month ago, oil has increased by 9.5 percent. On June 14th, oil was trading at $67.69. Although historically high, if Philip Verleger is correct a $68 barrel of oil will look mighty cheap. And it's not just a lack of supply or an increase in demand; it's both. From Forbes:
"Scheduled summer North Sea maintenance lent support, while the unexpected closure of the Central Area Transmission System (CATS) stoked supply jitters. J-Block, a group of oilfields in the region, has been unable to produce oil or gas since July 1, when CATS was closed."
Maintenance issues are strangling supply, while increased growth in emerging economies such as Chindia are accelerating demand. I don't anticipate the price to subside any time soon. Hold onto your oil funds!
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